A combined Hewlett-Packard-Compaq will account for roughly 12% of the IT market in New Zealand, says International Data (IDC) country manager, Dinesh Kumar.

“The question you have to ask is why would HP buy Compaq,” says Kumar. He says there are six areas to look at from a New Zealand perspective.

“The combined company would account for roughly 12% of the IT market in New Zealand and have revenues of $550 million with 470 staff,” he says.

“Firstly, Compaq owns the corporate PC space in New Zealand. HP is trying to get into it but really it is Compaq’s space.” The corporate end of the PC market is where most manufacturers want to be because companies generally upgrade their PCs more frequently than home users.

“Secondly, they want Compaq’s services division — it’s outsourcing and so on.” Both companies have put a lot of stock in their services arms in the past couple of years as it has become apparent that the margins on PC manufacture are shrinking all the time.

“Thirdly, there is Compaq’s delivery structure. It has an internet data centre and HP would want that.” HP has recently announced the closure of its online store after 14 months of operation. Dissent from channel partners was the key problem, according to channel manager Justine Tye.

HP would also want Compaq’s Application Development Centre (APC) in Christchurch. The APC was a jewel in Compaq’s crown during Y2K as it served as a software-debugging centre for the region and since then it has gone from strength to strength.

“On top of that Compaq is dominant in the storage space area and HP wants a piece of that as well. It sells storage devices but they’re re-badged and not their own.”

Finally Kumar says HP would want Compaq because it is very reliant on the PC and peripherals market.

“HP would get roughly 85 to 90% of its income from the PC and printers and the like. With Compaq they can spread that load more evenly from the bottom of the range scanner or desk jet printer up to the top of the range servers and storage devices.”

With so much in common in New Zealand however there surely must be layoffs in the coming months. Any merger of this size would take months to bed down properly — Compaq has only recently finished digesting Digital which it bought three years ago. Now two quite distinct corporate cultures must work out how to proceed hand in hand to the future.

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